I need to file my 2017. But I don't know what to do with my home sale. I purchased in 4/2016 and sold 6/2017. During that time I rented out the home for 2 months 3/2017 - 4/2017. I occupied the home from 5/2017 until it sold. I had a $30,000 gain. Once I dispose of the rental do I use 4797 or 8949? And can I use Turbo Basic for this reporting?
@jetcityelli wrote:
Once I dispose of the rental do I use 4797 or 8949? And can I use Turbo Basic for this reporting?
Use Form 8949 (your last use was as a principal residence) and I would recommend upgrading to Premier since you will get more guidance with entering the transaction - which will be under Sale of Home (gain or loss).
The sale is reported on Schedule D and Form 8949.
Use the procedure in TurboTax for sale of home and report the time it was a rental and the depreciation taken on the home as a rental.
Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Scroll down to Less Common Income
On Sale of Home (gain or loss), click the start or update button
Or enter sale of home in the Search box located in the upper right of the program screen. Click on Jump to sale of home
Since you lived in the home less than 2 years, you do not qualify for the home sale exclusion*, so the entire $30,000 gain is a taxable long term capital gain. Since you sold it in the only year that you had rental income, you are not required to claim depreciation**. You can split the gain between form 4797 and 8949, but for simplicity, you should use for 8949 (for most people, the tax comes out the same). Report it as the sale of real estate. The online version of TurboTax (TT) basic can not handle this. The download/CD versions can.
*If you had to sell because of a job relocation, or other "unforeseen circumstances", you may qualify for a partial exclusion. See https://www.nolo.com/legal-encyclopedia/the-partial-home-sale-tax-exclusion-irs-approved-unforeseen-circumstances.html
**It may appear that claiming depreciation may save on taxes, by reducing the rental income (or increasing the rental loss). But, you will than have to claim depreciation recapture, which will offset the tax savings. Depreciation recapture is taxed as ordinary income (but not more than 25%), not at long term capital gains rates.